Accounts Receivable Management Industry News

HEI, Inc. Announces Third Quarter 2012 Results

HEI (News - Alert), Inc. (Pink Sheets: HEII) (http://www.heii.com)
today announced its financial results for the third quarter of fiscal
year 2012, which ended September 29, 2012.

Sales for the third quarter were $9,882,000, compared to $9,221,000 for
the third quarter of 2011. The Company generated a net loss of
($503,000) for the third quarter of 2012 compared to net income of
$162,000 for the same period in 2011. Sales for the first nine months of
2012 were $28,595,000, compared to $28,215,000 for the first nine months
of 2011. The Company generated a year-to-date net loss of ($1,012,000)
for 2012 compared to a net income of $686,000 for the first nine months
of 2011.

Sales were up 7.2% year-over-year in the third quarter as a result of
increases in our Victoria operation which was partially offset by
decreased sales in our other two operating divisions. Gross margins were
down on a consolidated basis with Victoria gross margins improving as a
result of improved efficiencies associated with the increased sales
volumes while the other two operating divisions' gross margins declined
as a result of product mix changes and the lower sales levels as
compared to the prior year. The net loss for the third quarter of fiscal
2012 included an increase to our reserve for inventory obsolescence of
$380,000, which had no cash impact during the quarter.

Also during the third quarter, Thomas Leahy resigned from the board of
directors for personal reasons, and Timothy Floeder was elected to the
board of directors. Mr. Leahy continues to be a significant shareholder
of HEI.

HEI, Inc. designs, develops and manufactures ultra-miniature
microelectronics, substrates, systems, connectivity and software
solutions for customers engaged in the medical, hearing,
telecommunications, military, aerospace, and industrial markets. HEI
provides its customers with a single point of contact that can take
an idea from inception to a fully functional and cost effective
product utilizing innovative design solutions and by the application
of state-of-the-art materials, processes and manufacturing
capabilities.

HEI - Tempe (Quick Turn and Production High Density Interconnect
Flex and Rigid-Flex)

610 South Rockford Drive, Tempe, AZ 85281

FORWARD LOOKING INFORMATIONInformation in this news
release, which is not historical, includes forward-looking statements
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 that involve substantial risks and
uncertainties. You can identify these statements by forward-looking
words such as "may," "will," "expect," "anticipate," "believe,"
"intend," "estimate," "continue," and similar words. Statements
contained in this press release, including the implementation of
business strategies, growth of specific markets, improved results and
estimated HEI revenue, cash flow and profits, are forward looking
statements. All such forward-looking statements involve risks and
uncertainties including, without limitation, adverse business and market
conditions, the ability of HEI to secure and satisfy customers, the
availability and cost of materials from HEI's suppliers, HEI's ability
to satisfy financial or other obligations or covenants set forth in its
financing agreements, adverse competitive developments, change in or
cancellation of customer requirements, collection of receivables and
outstanding debt, HEI's ability to control fixed and variable operating
expenses, and other risks detailed in previous HEI SEC (News - Alert) filings. Since
HEI is no longer reporting to the SEC, readers are cautioned to weigh
the potential for additional risk factors based on ongoing business
activities and the current economic conditions. The information set
forth herein should be read in light of such risks. We undertake no
obligation to update these statements to reflect ensuing events or
circumstances, or subsequent actual results.

HEI, INC.

BALANCE SHEETS

September 29, 2012

December 31, 2011

(In thousands, except share and per share data)

ASSETS

Current assets:

Cash and cash equivalents

$

-

$

-

Accounts receivable, net

5,459

5,489

Inventories, net

6,081

4,680

Deferred income taxes

447

447

Other current assets

814

253

Total current assets

12,801

10,869

Property and equipment:

Land

216

216

Building and improvements

4,337

4,337

Fixtures and equipment

28,329

26,676

Accumulated depreciation and amortization

(26,568

)

(25,788

)

Property and equipment, net

6,314

5,441

Security deposit

230

230

Other long-term assets

221

328

Total assets

$

19,566

$

16,868

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

4,177

$

2,151

Accrued liabilities

1,290

701

Customer deposit liabilities

172

11

Current maturities of long-term liabilities

1,116

927

Total current liabilities

6,755

3,790

Long-term liabilities:

Deferred income taxes

447

447

Other long-term liabilities, less current maturities

2,547

2,443

Long-term debt, less current maturities

6,428

5,933

Total long-term liabilities, less current maturities

9,422

8,823

Total liabilities

16,177

12,613

Commitments and contingencies

Shareholders' equity:

Undesignated stock

-

-

Convertible preferred stock, $.05 par

2

2

Common stock, $.05 par

506

506

Additional paid-in capital

28,579

28,433

Accumulated deficit

(25,698

)

(24,686

)

Total shareholders' equity

3,389

4,255

Total liabilities and shareholders' equity

$

19,566

$

16,868

Certain minor reclassifications have been made to our prior period
financial information in order to conform to the current year
presentation.

HEI, INC.

STATEMENTS OF OPERATIONS

Three Months Ended

Nine Months Ended

September 29, 2012

October 1, 2011

September 29, 2012

October 1, 2011

(In thousands, except share and per share data)

Net sales

$

9,882

$

9,221

$

28,595

$

28,215

Cost of sales

8,846

7,712

25,008

23,596

Gross profit

1,037

1,509

3,587

4,619

Operating expenses:

Selling, general and administrative

1,337

1,100

3,876

3,285

Research, development and engineering

92

174

448

423

Operating income (loss)

(392

)

235

(737

)

910

Interest expense, net

(113

)

(90

)

(289

)

(245

)

Other income (expense), net

3

17

17

20

Income (loss) before income taxes

(501

)

162

(1,009

)

686

Income tax expense

2

-

3

-

Net income (loss)

$

(503

)

$

162

$

(1,012

)

$

686

Income (loss) per common share:

Basic

$

(0.05

)

$

0.02

$

(0.10

)

$

0.07

Diluted

$

(0.05

)

$

0.02

$

(0.10

)

$

0.07

Weighted average common shares outstanding:

Basic

10,120,000

10,045,000

10,120,000

9,933,000

Diluted

10,120,000

10,045,000

10,120,000

9,933,000

Certain minor reclassifications have been made to our prior period
financial information in order to conform to the current year
presentation.